Newsom Vetoes California PUC Inspector General Bill as Cost Oversight Debate Widens
The veto blocks new accountability for California's utility regulator as FERC investigates data center cost allocation and wildfire liabilities remain unresolved.
California Governor Gavin Newsom on Friday (2026-09-18) vetoed a bill that would have created an inspector general for the state Public Utilities Commission, blocking an oversight mechanism that supporters argued was essential as the regulator navigates rising electricity costs, growing data center load and unresolved wildfire liability questions.6
Newsom said he understood the desire to bring more oversight to the commission but that the bill contained several "flaws" and also created obligations he found problematic. His veto statement did not elaborate further on the specific objections.6
The veto arrives at an uncomfortable moment for California's energy regulatory framework. The CPUC has spent years managing the fallout from PG&E's Chapter 11 bankruptcy in 2019, which was triggered by more than $30 billion in wildfire liabilities from the 2017 and 2018 fire seasons. Rolling blackouts in 2020 and 2022 followed, generating sustained pressure on the commission's credibility and its capacity to manage competing demands on the grid.1,5
At the federal level, FERC in June (2026-06-18) launched a sweeping investigation into how regional power grids and utilities divide the costs of delivering electricity to data centers, directing the inquiry at grids including CAISO. The probe added federal-level scrutiny to the same cost allocation disputes that California lawmakers had hoped a more accountable CPUC might be better positioned to resolve.2
The California legislature has moved in parallel with FERC, though outcomes remain in Newsom's hands. AB 1168, which passed this session and is awaiting signature, would require the CPUC to assess rate structures ensuring data centers pay a reasonable share of transmission and distribution costs. A separate bill, AB 2589, would require the commission to evaluate the full effect of federal laws on California's electricity market.4
CAISO spot prices on Monday (2026-09-21) showed a significant north-south split: NP15 stood at $67.15 per megawatt-hour against SP15 at $32.24, a differential that underscores the locational constraints both state and federal regulators are being pressed to address through revised cost allocation rules.
The fiscal stakes behind those debates are material but contested. A memo circulated in Sacramento estimated a proposed solar fee could raise between $35 million and $81 million per year, while a storage fee could generate between $61 million and $86 million annually. Ranges that wide suggest the underlying economics remain disputed rather than settled.3
Industry lobbying intensity shows where the financial pressure sits. The Edison Electric Institute spent $9.4 million on federal lobbying in 2025, according to OpenSecrets data. The American Petroleum Institute spent $7.8 million. Clean energy trade groups are closing the gap: the American Clean Power Association spent more than $5 million that year, its biggest annual outlay on record, and the Solar Energy Industries Association spent $2.8 million, also its largest federal lobbying expenditure on record.3
The veto does not prevent revised oversight legislation in the next session, and Newsom's language acknowledged the principle while rejecting the specific mechanism. But the FERC data center cost inquiry is already running, and AB 1168 still awaits signature. AB 1168 now becomes the more immediate indicator of how far Newsom will go on utility cost accountability — and whether California's grid regulation can move fast enough to stay relevant to the federal proceeding already underway.6,4,2